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Deductions & credits
Not necessarily, your opinion is far too black-and-white for the facts as we know them.
Back when theft losses were still deductible, there was sometimes considerable advantage in deducting a loss as a theft rather than as a bad debt, because the theft could be deducted all at once even though it was subject to a 10% limitation, while a bad debt can only be deducted $3000 per year. In such cases, the IRS ruled that in order for there to be a theft, there must be a person or persons who benefit illegally. In other words, there must be a criminal in order for there to be a crime.
A failed business is not necessarily a criminal enterprise. that’s why I indicated in my original answer that it might not be a bad debt deduction if local authorities charged the travel agency owners with criminal offenses. In the absence of criminal charges, I don’t see how the IRS can object to a bad debt deduction. It can’t be a crime unless there is a criminal. That’s from the IRS themselves back when taking a theft deduction was an option.